AudioCodes (NASDAQ:AUDC) Has Announced That It Will Be Increasing Its Dividend To US$0.18

AudioCodes Ltd. (NASDAQ:AUDC) will increase its dividend on the 1st of March to US$0.18. Despite this raise, the dividend yield of 1.3% is only a modest boost to shareholder returns.

View our latest analysis for AudioCodes

AudioCodes' Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, AudioCodes' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 15.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 42%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

AudioCodes Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The first annual payment during the last 4 years was US$0.20 in 2018, and the most recent fiscal year payment was US$0.36. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. AudioCodes has seen EPS rising for the last five years, at 18% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

AudioCodes Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that AudioCodes is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for AudioCodes that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.